Alibaba Group Holding Limited (BABA) Faces Analyst Downgrade, Counters with Queen3.5 AI Launch

Alibaba Group Holding Limited (NYSE:BABA) is one of the best emerging markets stocks to buy right now. On February 18, Erste Group downgraded Alibaba Group Holding Limited (NYSE:BABA) from Buy to Hold. Analyst Hans Engel said the company’s operating margins have dropped and long-term debt has increased, raising concerns about its financial health.

At the same time, Alibaba is focusing on AI monetization through cloud services and developing its own AI chips, which Erste sees as a positive. Still, the firm expects the stock to trade sideways in the medium term rather than show strong gains.

On February 16, Alibaba Group Holding Limited unveiled a new artificial intelligence model designed to execute complex tax independently.

Qwen 3.5 is the new AI model from the Chinese tech giant, offering significant performance and cost improvements as it seeks to take on US rivals. According to Alibaba, the model is 60% cheaper to use and eight times better in processing large workloads than its predecessor. It also enables independent action-taking across mobile and desktop apps.

In addition, Qwen3.5 supports new coding and agentic capabilities and is compatible with open-source AI agents. It also comes with 397 billion parameters that shape how an AI system learns and reasons. Alibaba has also provided test results showing that its model performs at par with leading models from OpenAI, Anthropic, and DeepMind.

Alibaba Group Holding Limited (NYSE:BABA) is a Chinese multinational technology conglomerate that specializes in e-commerce, retail, internet services, cloud computing, and artificial intelligence. Founded in 1999, it operates a vast, data-driven ecosystem that connects manufacturers, sellers, and consumers globally, acting primarily as a platform intermediary rather than a traditional retailer that holds inventory.

While we acknowledge the potential of BABA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.